Apple's Verizon iPhone could 'cannibalize' 6.5M sales from AT&TThough the arrival of the iPhone on Verizon is expected to increase overall U.S. iPhone sales for Apple, the effect on carrier AT&T is expected to be significant.
Analyst Gene Munster with Piper Jaffray said in a note to investors on Monday that he believes the launch of a Verizon iPhone will increase total 2011 U.S. handset sales for Apple by 2.5 million, a number he cautioned "may be conservative." In all, Munster sees AT&T selling 11 million iPhones, and 9 million from Verizon.
But if the iPhone didn't debut on Verizon in 2011, Munster said AT&T alone would likely sell 17.5 million of Apple's handset in the 2011 calendar year.
Munster sees Verizon activating 25 million total smartphones in calendar year 2011. If Apple does indeed account for 9 million, the handset maker would sell 36 percent of the smartphones on Verizon's network.
Munster's model places Apple with a much lower share of smartphone sales that the iPhone currently enjoys at AT&T. In the September 2010 quarter, Munster estimates that the record 5.2 million iPhones activated by AT&T accounted for about 80 percent of all smartphones sold by the carrier.
In a best-case scenario, Munster said AT&T could break even with 2010 and sell 15 million iPhones, and Verizon could match that sum. If that were to happen, it would add 10 million iPhone sales to Munster's 2011 projections, amounting to $5.9 billion in revenue and $1.27 earnings per share.
In addition, analyst Shaw Wu with Kaufman Bros. issued a note to investors on Monday in which he said Verizon arguably needs the iPhone more than Apple needs Verizon.
"The reason that VZ arguably needs the iPhone now more than ever is as it has lost share to AT&T over the last two quarters as Android momentum slows here in the U.S. (as per carrier subscriber data)," he said. "We also believe VZ is willing to pay to keep the iPhone exclusive on its network and AT&T. Because of this, we believe the iPhone isn't likely to appear on T-Mobile USA and/or Sprint until later."
Wu sees the Verizon iPhone adding an incremental 2 million to 3 million units per quarter, or 8 million to 12 million on an annual basis. If this prediction holds accurate, it could add between $1.00 and $2.00 earnings per share for Apple, an increase of between 5 and 10 percent in the 2011 calendar year EPS forecast from Kaufman Bros.